THE Court of Tax Appeals (CTA) has granted Metro Rail Transit Corp.’s (MRTC) refund claim worth P9.69 billion allegedly representing its deficiency taxes for the fiscal year 2012.
In a 16-page decision on March 23, the CTA Special Third Division said the tax agents that audited the firm were not authorized through a letter of authority (LoA).
“An LoA is a jurisdictional requirement of a valid audit and therefore a valid assessment,” according to the ruling penned by Associate Justice Maria Rowena Modesto-San Pedro.
“The resulting tax assessments are consequently null and void and the same bears no valid fruit.”
The Bureau of Internal Revenue’s (BIR) assessment covered MRTC’s alleged deficiencies of income tax, improperly accumulated earnings tax, expanded withholding tax, withholding tax on compensation, and documentary stamp tax inclusive of interests and penalties.
The petitioner is the firm tasked to build, lease, and maintain the Metro Rail Transit Line 3 (MRT-3). It also has an agreement with the Department of Transportation to manage phase 1 of the Light Rail Transit System (LRT) Line 3.
Under the country’s revenue code, only the commissioner of internal revenue (CIR) or his duly authorized representative may authorize an examination of a taxpayer’s tax liabilities. Revenue officers can only conduct audits and assessments through an LoA issued by the CIR.
Citing Supreme Court jurisprudence, the CTA said an LoA must be issued to afford taxpayers due process during the assessment process.
It said the revenue officers that conducted the audit were only authorized through a memorandum of assignment, which the court said is not a substitute for an LoA.
“To reiterate, the absence of an LoA is fatal to the validity of the respondent’s (CIR) deficiency assessment against the petitioner (MRTC) and the memorandum of assignment issued to the petitioner is not equivalent to an LoA,” the tribunal said.
“Being a void assessment, no valid fruit can be derived therefrom.” — John Victor D. Ordoñez
